Agri sector to lead economic recovery
OPINION: Over the past month, people up and down the country have been asking me what I think is in store for the Agri sector.
In its latest Financial Stability Report, bank governor Graeme Wheeler lists dairy as one of three systemic risks facing the New Zealand economy. The others are the Auckland housing crisis and the current global financial conditions.
Wheeler says the dairy sector is experiencing a sharp fall in incomes due to lower international prices. Many highly leveraged farms are facing negative cashflows and the risks will become more pronounced if low milk prices persist beyond the current season.
The bank says while the situation in the China market may improve, the recent removal of milk quotas in Europe and the increase in US dairy exports are likely to weigh on prices.
Wheeler says that if the lower dairy payout were to be sustained, “there is a risk that farm values could fall sharply and further exacerbate the increase in financial stress associated with lower farm incomes”.
